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Helmerich & Payne, Inc. Announces Second Quarter Results

April 26, 2018 6:00 AM

TULSA, Okla., April 26, 2018 (GLOBE NEWSWIRE) -- Helmerich & Payne, Inc. (NYSE: HP) reported a net loss of $12 million or $(0.12) per diluted share from operating revenues of $577 million for the second quarter of fiscal 2018. The net loss per diluted share includes $(0.07) of after-tax losses comprised of select items(3). Net cash provided by operating activities was $125 million for the second quarter of fiscal 2018.

President and CEO John Lindsay commented, “Second quarter operational results were strong and our team continued to execute in superb fashion in this steadily improving environment. Higher crude oil prices bolstered increases in the U.S. rig count which in turn supported rig pricing improvements during the quarter.

“The demand for super-spec rigs continues to persist as the industry’s super-spec fleet remains nearly 100% utilized. H&P leads the way with more than 40% of the super-spec market share in U.S. Land. We also have approximately 50% of the industry’s idle rig capacity not already at super-spec capability that can be readily upgraded to those specifications in the current pricing environment. Our robust financial position and the composition of our fleet continues to drive our ability to respond to current and future FlexRig demand. Given the tightening market conditions for FlexRigs and the value proposition we provide for customers, we expect increases in average dayrates for our rigs in the U.S. Land spot market to accelerate during the next few months.

“The Permian is the most active basin in the U.S. and has been the epicenter of the industry’s recovery. H&P has 107 rigs operating in the region, providing us with a leading market share of more than 20% and we expect our rig count to continue to grow throughout the next several months. Our attention to work-force staffing during the last downturn continues to enable us to effectively manage tightening labor market conditions in the Permian.

“The strengthening of crude oil prices has also been encouraging for our international and offshore businesses as we have seen a rise in the number of inquiries and opportunities in these segments.

“Our subsidiaries, MOTIVE® Drilling Technologies, Inc. and MagVAR, remain at the technological forefront of providing value-added services in improving overall well economics for our customers. These businesses are growing activity at impressive rates as the importance of wellbore quality and placement is increasing, while at the same time longer laterals and tighter well spacing are becoming more and more prevalent. These technology offerings, combined with our digital FlexRig platform, continue to provide significant value for our customers going forward.

“Our relentless focus on our customers was recognized by EnergyPoint Research during the second quarter. For 10 years in a row, H&P has received the top customer satisfaction ranking in the industry. This is driven by our commitment to service, but also our ability to deliver stellar performance with our Family of SolutionsTM.”

Operating Segment Results for the Second Quarter of Fiscal 2018

U.S. Land Operations:

Segment operating income increased by $2.3 million to $27.1 million sequentially. Positive operating results continue to be supported by sequential increases in both quarterly revenue days and average rig revenue per day. The segment’s depreciation expense for the quarter includes non-cash charges of $7.1 million for abandonments of used drilling rig components related to rig upgrades, compared to similar non-cash charges of $7.2 million during the first fiscal quarter of 2018.

The number of quarterly revenue days increased sequentially by approximately 2%. Adjusted average rig revenue per day increased by $544 to $22,711(4) as pricing continued to improve throughout the quarter. The average rig expense per day increased sequentially by $540 to $14,086. The corresponding adjusted average rig margin per day was roughly flat at $8,625(4) for the second fiscal quarter.

Offshore Operations:

Segment operating income decreased by $3.3 million to $5.4 million sequentially. The number of quarterly revenue days on H&P-owned platform rigs decreased sequentially by approximately 2%, and the average rig margin per day decreased sequentially by $2,871 to $9,504 primarily due to unfavorable adjustments to self-insurance expenses. Management contracts on customer-owned platform rigs contributed approximately $5.1 million to the segment’s operating income, compared to approximately $6.5 million during the prior quarter.

International Land Operations:

The segment had an operating loss this quarter as compared to operating income during the previous quarter. The $4.2 million sequential decrease in operating income was primarily attributable to favorable adjustments that benefited the prior quarter (ended December 31, 2017). Revenue days decreased during the quarter by 4% to 1,530. The average rig margin per day decreased by $2,818 to $8,533.

Operational Outlook for the Third Quarter of Fiscal 2018

U.S. Land Operations:

Offshore Operations:

International Land Operations:

Other Estimates for Fiscal 2018

Other Highlights

Select Items Included in Net Income (or Loss) per Diluted Share

Second Quarter of Fiscal 2018 net loss of $(0.12) per diluted share included $(0.07) in after-tax losses comprised of the following:

First Quarter of Fiscal 2018 net income of $4.55 per diluted share included $4.57 in after-tax gains comprised of the following:

About Helmerich & Payne, Inc.

Helmerich & Payne, Inc. is primarily a contract drilling company. As of April 26, 2018, the Company’s fleet includes 350 land rigs in the U.S., 38 international land rigs, and eight offshore platform rigs. The Company’s global fleet has a total of 388 land rigs, including 373 AC drive FlexRigs.

Forward-Looking Statements

This release includes “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and such statements are based on current expectations and assumptions that are subject to risks and uncertainties. All statements other than statements of historical facts included in this release, including, without limitation, statements regarding the registrant’s future financial position, operations outlook, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. For information regarding risks and uncertainties associated with the Company’s business, please refer to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s SEC filings, including but not limited to its annual report on Form 10‑K and quarterly reports on Form 10‑Q. As a result of these factors, Helmerich & Payne, Inc.’s actual results may differ materially from those indicated or implied by such forward-looking statements. We undertake no duty to update or revise our forward-looking statements based on changes in internal estimates, expectations or otherwise, except as required by law.

__________________________Note Regarding Trademarks. Helmerich & Payne, Inc. owns or has rights to the use of trademarks, service marks and trade names that it uses in conjunction with the operation of its business. Some of the trademarks that appear in this release or otherwise used by H&P include FlexRig and Family of Solutions, which may be registered or trademarked in the U.S. and other jurisdictions.

(1) The term “super-spec” herein refers to rigs with the following specifications: AC drive, 1,500 hp drawworks, 750,000 lbs. hookload rating, 7,500 psi mud circulating system and multiple-well pad capability. (2) EnergyPoint Research published its annual Oilfield Products & Services Customer Satisfaction Survey results on February 7, 2018. Many in the industry use this independent survey as a benchmark for measuring customer satisfaction within oilfield services.(3) See the corresponding section of this release for details regarding the select items.(4) See the Selected Statistical & Operational Highlights table(s) for details on the revenues or charges excluded on a per revenue day basis. The inclusion or exclusion of these amounts results in adjusted revenue, expense, and/or margin per day figures, which are all non-GAAP measures.(5) On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law, effective January 1, 2018. H&P continues to analyze the effect of the new tax law on the Company’s tax position, which may result in further adjustments to our income tax provision.

Contact: Investor Relations[email protected](918) 588‑5190

HELMERICH & PAYNE, INC.
Unaudited
(in thousands, except per share data)
Three Months Ended Six Months Ended
CONSOLIDATED STATEMENTS OF March 31 December 31 March 31 March 31
OPERATIONS 2018 2017 2017 2018 2017
Operating Revenues:
Drilling — U.S. Land $ 482,729 $ 461,640 $ 330,967 $ 944,369 $ 594,603
Drilling — Offshore 32,983 33,366 36,235 66,349 70,047
Drilling — International Land 52,459 63,214 34,757 115,673 102,788
Other 9,313 5,867 3,324 15,180 6,435
$ 577,484 $ 564,087 $ 405,283 $ 1,141,571 $ 773,873
Operating costs and expenses:
Operating costs, excluding depreciation and amortization 385,556 373,083 296,829 758,639 544,508
Depreciation and amortization 145,675 143,267 152,777 288,942 286,624
General and administrative 48,325 46,548 33,519 94,873 67,781
Research and development 4,436 3,234 2,719 7,670 5,527
Income from asset sales (5,255) (5,565) (14,889) (10,820) (15,731)
578,737 560,567 470,955 1,139,304 888,709
Operating income (loss) (1,253) 3,520 (65,672) 2,267 (114,836)
Other income (expense):
Interest and dividend income 1,847 1,724 1,338 3,571 2,328
Interest expense (6,028) (5,773) (6,084) (11,801) (11,139)
Other (121) 530 174 409 561
(4,302) (3,519) (4,572) (7,821) (8,250)
Income (loss) from continuing operations before income taxes (5,555) 1 (70,244) (5,554) (123,086)
Income tax benefit (3,922) (500,641) (21,771) (504,563) (40,059)
Income (loss) from continuing operations (1,633) 500,642 (48,473) 499,009 (83,027)
Income (loss) from discontinued operations, before income taxes 1,263 (519) (94) 744 (518)
Income tax provision 11,509 17 251 11,526 336
Loss from discontinued operations (10,246) (536) (345) (10,782) (854)
NET INCOME (LOSS) $ (11,879) $ 500,106 $ (48,818) $ 488,227 $ (83,881)
Basic earnings per common share:
Income (loss) from continuing operations $ (0.03) $ 4.57 $ (0.45) $ 4.55 $ (0.77)
Loss from discontinued operations $ (0.09) $ — $ — $ (0.10) $ (0.01)
Net income (loss) $ (0.12) $ 4.57 $ (0.45) $ 4.45 $ (0.78)
Diluted earnings per common share:
Income (loss) from continuing operations $ (0.03) $ 4.55 $ (0.45) $ 4.53 $ (0.77)
Loss from discontinued operations $ (0.09) $ — $ — $ (0.10) $ (0.01)
Net income (loss) $ (0.12) $ 4.55 $ (0.45) $ 4.43 $ (0.78)
Weighted average shares outstanding:
Basic 108,868 108,683 108,565 108,775 108,419
Diluted 108,868 109,095 108,565 109,212 108,419

HELMERICH & PAYNE, INC.
Unaudited
(in thousands)
March 31 September 30
CONSOLIDATED CONDENSED BALANCE SHEETS 2018 2017
ASSETS
Cash and cash equivalents $ 334,764 $ 521,375
Short-term investments 45,270 44,491
Other current assets 750,949 669,398
Current assets of discontinued operations — 3
Total current assets 1,130,983 1,235,267
Investments 73,356 84,026
Net property, plant, and equipment 4,898,525 5,001,051
Other assets 158,928 119,644
TOTAL ASSETS $ 6,261,792 $ 6,439,988
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities $ 340,107 $ 344,311
Current liabilities of discontinued operations 78 74
Total current liabilities 340,185 344,385
Non-current liabilities 910,330 1,434,098
Non-current liabilities of discontinued operations 14,691 4,012
Long-term debt less unamortized discount and debt issuance costs 493,433 492,902
Total shareholders’ equity 4,503,153 4,164,591
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 6,261,792 $ 6,439,988

HELMERICH & PAYNE, INC.
Unaudited
(in thousands)
Six Months Ended
March 31
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS 2018 2017
As adjusted
OPERATING ACTIVITIES:
Net income (loss) $ 488,227 $ (83,881)
Adjustment for loss from discontinued operations 10,782 854
Income (loss) from continuing operations 499,009 (83,027)
Depreciation and amortization 288,942 286,624
Changes in assets and liabilities (602,248) (54,364)
Income from asset sales (10,820) (15,731)
Other 22,207 16,856
Net cash provided by operating activities from continuing operations 197,090 150,358
Net cash used in operating activities from discontinued operations (96) (80)
Net cash provided by operating activities 196,994 150,278
INVESTING ACTIVITIES:
Capital expenditures (191,202) (175,303)
Purchase of short-term investments (36,784) (37,899)
Payment for acquisition of business, net of cash acquired (47,886) —
Proceeds from sale of short-term investments 32,020 34,000
Proceeds from asset sales 17,826 13,459
Net cash used in investing activities (226,026) (165,743)
FINANCING ACTIVITIES:
Dividends paid (153,433) (152,617)
Proceeds from stock option exercises 1,645 10,372
Payments for employee taxes on net settlement of equity awards (5,791) (6,105)
Net cash used in financing activities (157,579) (148,350)
Net decrease in cash and cash equivalents (186,611) (163,815)
Cash and cash equivalents, beginning of period 521,375 905,561
Cash and cash equivalents, end of period $ 334,764 $ 741,746

__________________________“As adjusted” – Effective October 1, 2017, we adopted Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting. The cash flow statement for the six months ended March 31, 2017 has been adjusted to reflect changes that were applied retrospectively from that adoption.

Three Months Ended Six Months Ended
March 31 December 31 March 31 March 31
SEGMENT REPORTING 2018 2017 2017 2018 2017
(in thousands, except days and per day amounts)
U.S. LAND OPERATIONS
Revenues $ 482,729 $ 461,640 $ 330,967 $ 944,369 $ 594,603
Direct operating expenses 317,688 299,064 238,249 616,752 408,855
General and administrative expense 14,011 13,993 12,573 28,004 24,215
Depreciation 123,955 123,838 131,995 247,793 244,271
Segment operating income (loss) $ 27,075 $ 24,745 $ (51,850) $ 51,820 $ (82,738)
Revenue days 18,666 18,362 13,166 37,028 22,950
Average rig revenue per day $ 22,928 $ 22,400 $ 22,654 $ 22,666 $ 23,564
Average rig expense per day $ 14,086 $ 13,546 $ 15,612 $ 13,818 $ 15,438
Average rig margin per day $ 8,842 $ 8,854 $ 7,042 $ 8,848 $ 8,126
Rig utilization 59 % 57 % 42 % 58% 36 %
OFFSHORE OPERATIONS
Revenues $ 32,983 $ 33,366 $ 36,235 $ 66,349 $ 70,047
Direct operating expenses 23,595 21,122 26,023 44,717 48,868
General and administrative expense 1,106 1,165 902 2,271 1,818
Depreciation 2,833 2,354 3,398 5,187 6,665
Segment operating income $ 5,449 $ 8,725 $ 5,912 $ 14,174 $ 12,696
Revenue days 450 460 595 910 1,239
Average rig revenue per day $ 33,583 $ 35,776 $ 36,006 $ 34,692 $ 33,569
Average rig expense per day $ 24,079 $ 23,401 $ 25,189 $ 23,737 $ 22,929
Average rig margin per day $ 9,504 $ 12,375 $ 10,817 $ 10,955 $ 10,640
Rig utilization 63 % 63 % 77 % 63% 77 %
INTERNATIONAL LAND OPERATIONS
Revenues $ 52,459 $ 63,214 $ 34,757 $ 115,673 $ 102,788
Direct operating expenses 39,249 46,737 32,181 85,986 85,531
General and administrative expense 832 1,132 920 1,964 1,589
Depreciation 13,073 11,811 12,633 24,884 25,820
Segment operating income (loss) $ (695) $ 3,534 $ (10,977) $ 2,839 $ (10,152)
Revenue days 1,530 1,587 870 3,117 2,027
Average rig revenue per day $ 32,796 $ 38,039 $ 37,340 $ 35,465 $ 47,923
Average rig expense per day $ 24,263 $ 26,688 $ 33,649 $ 25,497 $ 38,936
Average rig margin per day $ 8,533 $ 11,351 $ 3,691 $ 9,968 $ 8,987
Rig utilization 45 % 45 % 25 % 45% 29 %

Operating statistics exclude the effects of offshore platform management contracts, gains and losses from translation of foreign currency transactions, and do not include reimbursements of “out-of-pocket” expenses in revenue per day, expense per day and margin calculations.

Reimbursed amounts were as follows:

U.S. Land Operations $ 54,750 $ 50,315 $ 32,704 $ 105,065 $ 53,802
Offshore Operations $ 5,199 $ 4,098 $ 6,066 $ 9,297 $ 10,497
International Land Operations $ 2,281 $ 2,861 $ 2,272 $ 5,142 $ 5,649

Segment operating income for all segments is a non-GAAP financial measure of the Company’s performance, as it excludes general and administrative expenses, corporate depreciation, income from asset sales and other corporate income and expense. The Company considers segment operating income to be an important supplemental measure of operating performance for presenting trends in the Company’s core businesses. This measure is used by the Company to facilitate period-to-period comparisons in operating performance of the Company’s reportable segments in the aggregate by eliminating items that affect comparability between periods. The Company believes that segment operating income is useful to investors because it provides a means to evaluate the operating performance of the segments and the Company on an ongoing basis using criteria that are used by our internal decision makers. Additionally, it highlights operating trends and aids analytical comparisons. However, segment operating income has limitations and should not be used as an alternative to operating income or loss, a performance measure determined in accordance with GAAP, as it excludes certain costs that may affect the Company’s operating performance in future periods.

The following table reconciles operating income per the information above to income (loss) from continuing operations before income taxes as reported on the Consolidated Statements of Operations (in thousands).

Three Months Ended Six Months Ended
March 31 December 31 March 31 March 31
2018 2017 2017 2018 2017
Operating income (loss)
U.S. Land $ 27,075 $ 24,745 $ (51,850) $ 51,820 $ (82,738)
Offshore 5,449 8,725 5,912 14,174 12,696
International Land (695) 3,534 (10,977) 2,839 (10,152)
Other (7,015) (7,317) (1,134) (14,332) (3,183)
Segment operating income (loss) $ 24,814 $ 29,687 $ (58,049) $ 54,501 $ (83,377)
Corporate general and administrative (28,267) (28,549) (19,124) (56,816) (40,159)
Other depreciation (3,418) (3,545) (3,822) (6,963) (7,899)
Inter-segment elimination 363 362 434 725 868
Income from asset sales 5,255 5,565 14,889 10,820 15,731
Operating income (loss) $ (1,253) $ 3,520 $ (65,672) $ 2,267 $ (114,836)
Other income (expense):
Interest and dividend income 1,847 1,724 1,338 3,571 2,328
Interest expense (6,028) (5,773) (6,084) (11,801) (11,139)
Other (121) 530 174 409 561
Total other income (expense) (4,302) (3,519) (4,572) (7,821) (8,250)
Income (loss) from continuing operations before income taxes $ (5,555) $ 1 $ (70,244) $ (5,554) $ (123,086)

SUPPLEMENTARY STATISTICAL INFORMATION

The tables and information that follow are additional statistical information that may also help provide further clarity and insight into the operations of the Company.

SELECTED STATISTICAL & OPERATIONAL HIGHLIGHTS
(Used to determine adjusted per revenue day statistics, which is a non-GAAP measure)
Three Months Ended
March 31 December 31
2018 2017
(in dollars per revenue day)
U.S. Land Operations
Early contract termination revenues $ 217 $ 233
Total impact per revenue day: $ 217 $ 233

U.S. LAND RIG COUNTS & MARKETABLE FLEET STATISTICS
April 26 March 31 December 31 Q2FY18
2018 2018 2017 Average
U.S. Land Operations
Term Contract Rigs 128 125 102 118.5
Spot Contract Rigs 88 88 102 88.9
Total Contracted Rigs 216 213 204 207.4
Idle or Other Rigs 134 137 146 142.6
Total Marketable Fleet 350 350 350 350.0

H&P GLOBAL FLEET UNDER TERM CONTRACT STATISTICS
Number of Rigs Already Under Long-Term Contracts(1)
(Estimated Quarterly Average — as of 04/26/18)
Q3 Q4 Q1 Q2 Q3 Q4 Q1
Segment FY18 FY18 FY19 FY19 FY19 FY19 FY20
U.S. Land Operations 124.5 103.1 89.1 51.2 38.8 30.4 21.4
International Land Operations 10.0 10.0 10.0 10.0 10.0 10.0 9.0
Offshore Operations 1.9 0.3 — — — — —
Total 136.4 113.4 99.1 61.2 48.8 40.4 30.4

____________________________(1) The above term contract coverage excludes long-term contracts for which the Company received early contract termination notifications as of 04/26/18. Given notifications as of 04/26/18, the Company expects to generate approximately $2 million in the third fiscal quarter of 2018 and approximately $3 million over the next 6 months from early terminations corresponding to long-term contracts and related to its U.S. Land segment. All of the above rig contracts have original terms equal to or in excess of six months and include provisions for early termination fees.

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Source: Helmerich & Payne, Inc.

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